Traditionally, centralized financial infrastructure systems have been used mainly for storing gold or other assets, which belong to different nations in one and the same location. When transferring assets from one nation to another, all that needs to be done is to simply transfer assets from the account that belongs to the paying nation to the account which belongs to the nation that is to receive the payment.
As can be realized, the use of a centralized institution greatly facilitates the processing of payments, and for this reason, there has arisen an interest for using “CSD-like” systems for other commodities than gold, such as for example bonds and shares, and in principle for any kind of asset or instrument that can be imagined in the financial market, e.g. corporate bonds, warrants, etc.
Thus, in such an “expanded” centralized system, there would be a plethora of instruments advantageous to those using the system, e.g., issuers, brokers, banks, etc., as well as the operator of the system. Each instrument contained in such an expanded system is defined by a set of “events”, i.e., actions that can occur or be carried out for that particular instrument. The system as such could be referred to as a Centralized Securities Depository, abbreviated as CSD. Examples of existing CSD-type systems are the Frankfurter Kassenverein, DTC (New York), Sicovam (Paris) and Euroclear (Brussels).
A particular set of events is typically defined for each type of instrument, each particular set being “tailor-made” for each type of instrument. A drawback with this is that with the large number of instrument types envisioned in future expanded CSDs, there will be a need to create an equally large number of such sets of events. This will be cumbersome to handle, in addition to which, in different countries and markets, even for one and the same kind of instrument type, slightly different events may be used.
Accordingly, for each new market where one and the same CSD system is used, even if the instruments contained in it are also the same, an extensive amount of adaptation or tailoring has to be made. Also, for each new type of instrument that is added to the CSD-system, a new set of events has to be tailor-made for that instrument type.